Britannia merges dairy & biscuits sales teams

MUMBAI | BANGALORE: Britannia Industries has merged the sales team of its dairy portfolio with that of the more established biscuits business to tap new towns and achieve greater bargaining clout with retailers. Rivals see it as a move to cut costs when margins are under pressure. The Wadia Group company has also started using cycle-rickshaws to sell bread in Delhi neighbourhoods as part of a drive to increase the reach and speed of marketing.

"We realised that requirements of trade are evolving," Britannia Industries MD Vinita Bali told ET. The integration of sales force — Britannia's third in four years — will help the firm gain from synergies in distribution and replenishment, and expand the reach of its dairy products manifold. Trade rivals said it's a move to improve profitability of the country's leading biscuit marketer, with a 31.7% value share. Britannia posted a net profit margin of 2.9% in the quarter ended September due to high cost of raw materials such as milk and cashew nuts. "It certainly looks like Britannia is on an overdrive to cut costs," a senior executive of a competing firm said on condition of anonymity.

The integration of the sales team, the person added, is more to report higher profits than a response to competition. Another executive of a rival firm said, "If the aim is to cut costs, it's a good move; but if the aim is to generate topline growth, probably not." Britannia makes dairy products such as UHT milk, curd, fortified milk brands Actimind, Tiger Zor and most recently gourmet cheese, for which it has tied up with a factory in the Swiss Alps.

The dairy division, which accounts for close to 5% of its total sales, has doubled sales in four years. The integration of dairy with biscuit distribution would expand the reach of Britannia's dairy products manifold without the company actually making substantial investments, Chanchal Biyani, an analyst at Mumbai-based brokerage firm GEPL Capital, said. But the move has led to discontentment among a few distributors because they will have to invest in cold storage warehousing for dairy products.

Some distributors, who did not wish to be named, have decided to quit the company's dealership. "Britannia enjoys higher margins for dairy products and they want us to push it even in institutions such as restaurants and hotels where such products are seldom used," said a distributor who exited the partnership recently.